CFOs wary of Trump’s Twitter but optimistic about potential reforms

U.S. business executives are feeling near-record levels of optimism in the country’s business climate on the potential that President Donald Trump could accomplish meaningful tax reform this year, according to Duke University’s latest CFO Global Business Outlook survey.

The quarterly survey’s optimism index hit a 14-year high of 69 points out of 100 in March and is quickly approaching the all-time record of 71, which was set in 2003.

“There are specific policies like tax reform and regulatory reform that the business community generally sees positively,” said John Graham, a finance professor at the Fuqua School of Business and director of the survey. “... If there was ever a time for tax reform to happen, then it probably has the best possible chance now.”

What exact reforms can make it through Congress right now are unclear, but Graham believes it is likely the corporate tax rate will fall from its current 35 percent rate — a decrease that will translate to more money for businesses.

Duke’s CFO survey polls hundreds of chief financial officers from across the world four times a year. The latest survey was the 84th consecutive quarter that the survey had been released and nearly 900 CFOs responded to the survey, which stopped accepting responses March 10.

The survey showed that many businesses would use increased capital from a lower tax rate to raise employee headcount and boost wages — with 61 percent of U.S. firms planning to increase their payrolls in 2017.

Wage hikes are expected to average nearly 4 percent in 2017 and capital spending overall is expected to increase 6 percent on average, which would be an improvement from the flat or negative spending plans seen last year.

The survey’s optimism was not unbridled however, as the Trump administration’s first months in office have also raised some concerns.

While CFOs generally viewed a lower corporate and personal tax rate as positive — 86 percent indicated that lowering the corporate rate to 20 percent would be positive for the economy — they had reservations on other Trump policy goals such as a tariff increase on Mexican and Chinese goods and a potential border tax.

“I was curious about if, with the CFOs, there would be a drinking-the-cool-aid effect,” Graham said about whether or not financial officers would go along with all of Trump’s stated policy goals.

However, there was more of a mixed reaction toward some of Trump’s plans, he said.

More than half of respondents said substantial tariffs and a border tax would be bad for the U.S. economy. Graham said opposition was likely due to fears that such measures could stoke trade wars with China and other major exporters.

Executives also cautioned against the volatility Trump has created with his personal Twitter account and off-the-cuff remarks at public appearances. Two-thirds of CFOs said it would be better if the president stuck with prepared remarks in public and stopped using Twitter altogether.

The President has used Twitter in recent months to call out specific businesses. In December, the President used his personal account to complain about the estimated costs of a new Boeing-manufactured Air Force One. After the tweet, shares of Boeing fell as much as 1 percent before recovering.

“CFOs are very clear,” Graham said. “They don’t like the fluctuations and uncertainty that result from how President Trump communicates to the public, but they say many of his ideas will be good for business, even some of the more controversial ones.”